METALS MORNING VIEW 23/01: Metals face overhead resistance

Base metals prices on the London Metal Exchange are for the most part stronger this morning, Tuesday January 23, with the complex up by an average of 0.3%.

Three-month nickel prices ($12,860 per tonne) are up the most with a 0.9% gain, lead prices ($2,625 per tonne) are up by 0.6%, zinc ($3,427 per tonne) and copper prices (7,091 per tonne)are up by 0.2% and 0.3% respectively, while aluminium ($2,245 per tonne) and tin prices ($20,715 per tonne) are off by 0.1%.

Volume has been average with 7,659 lots traded as of 7.11 am London time.

The precious metals complex is stronger across the board, led by a 0.4% gain in silver ($17.07 per oz), gold ($1,336.64 per oz) and palladium prices ($1,099.60 per oz) are both up by 0.3% and platinum prices are up by 0.1% at $996.70 per oz.

On the Shanghai Futures Exchange today, base metals prices are for the most part stronger with gains averaging 0.6%. Lead and nickel prices lead with increases of 1.5% and 1.6% respectively, followed by a 0.5% rise in tin prices, a 0.1% increase in zinc prices and a 0.2% rise in copper prices to 53,720 yuan ($8,395) per tonne. Aluminium is bucking the trend with prices down by 0.1%. Spot copper prices in Changjiang are down 10 yuan per tonne at 53,320-53,500 yuan per tonne and the LME/Shanghai copper arbitrage ratio has edged lower to 7.57, from 7.59 on Monday.

In other metals in China, iron ore prices are down by 4% at 521.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are off by 0.7%, while gold and silver prices are both up by 0.2%.

Equities in Asia are positive today: CSI 300 (1.06%), Nikkei (1.29%), Hang Seng (1.55%), Kospi (1.38%) and the ASX 200 (0.75%). This follows a strong performance in western markets on Monday, where in the United States the Dow Jones closed up by 0.55% at 26,214.60, and in Europe where the Euro Stoxx 50 closed up by 0.44% at 3,665.28. Interesting that US President Donald Trump’s announcement on tariffs on solar panels and washing machines has not yet spooked the market, with Asian markets taking their cue from rising US equities and a temporary funding deal that will see US government re-open.

The dollar index at 90.46 continues to consolidate in in low ground. The low in September was at 91.01 and last Wednesday’s low was at 90.11. So the 2017 downward trend is continuing into 2018. On the back of dollar weakness, the other currencies are strong but consolidating recent gains: euro (1.2248), yen (110.97) and the Australian dollar (0.7971), while sterling is firmer, it was recently quoted at 1.3966, having earlier breached the 1.4000 level. The yuan continues to strengthen, it was recently quoted at 6.3977. Most of the emerging currencies we follow are stronger too, which shows a degree of risk-on and confidence.

On the economic front, the Bank of Japan’s interest rate remains unchanged, with the country’s all industries activity rising 1%, after a 0.3% rise previously. Data out later includes the United Kingdom’s net public sector borrowing requirement and CBI industrial order expectations, German and EU ZEW economic sentiment, there are EU Ecofin Economic and Financial Affairs Council meetings throughout the day as well as data on EU consumer confidence and the Richmond Manufacturing Index from the United States.

The base metals are for the most part looking upbeat, but the upside going is labored as high prices are attracting profit-taking and selling. Copper prices are the ones lagging the most, with prices stuck sideways in a $7,000-7,150 per tonne range. With prices in high ground there is bound to be more selling around, especially when prices break into new high ground, but the fact prices are generally holding up well suggests underlying sentiment remains bullish. With the Chinese Lunar New Year still three weeks away, it may be too early to expect markets to quieten down already, as such we would look for underlying sentiment to remain supportive.

The precious metals prices are generally strong and dips are generally being well supported, at least in gold and palladium. Silver and platinum price rallies have halted for now, so we wait to see how strong underlying sentiment is for these two metals.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

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